Retail conglomerate China Resources Enterprise's Q1 profit slides 31 pct

By Donny Kwok

HONG KONG, May 26 (Reuters) - Retail conglomerate China Resources Enterprise (CRE) said on Monday its first-quarter net profit fell 30.5 percent, hit by competition from e-commerce and a softer Chinese economy.

CRE, which has interests that span beverage making to supermarket chains, said its retail division recorded a 0.4 percent drop in same-store sales during the quarter as more consumers shopped online, while higher wages also hurt results.

Profit from retail operations fell 10.3 percent to HK$471 million ($61 million) during the quarter despite an 8.3 percent increase in revenue to HK$28.1 billion.

Its food division fell into the red with a HK$50 million loss compared with a HK$57 million profit a year earlier.

"Looking ahead, the retail division will continue to adopt hypermarkets as its main retail format and to expand its multi-format store network in regions where the group has already established a presence," chairman Chen Lang said in a statement.

"The division will continue to speed up its expansion into third-to-fourth tier cities, as well as into counties, towns and villages," Chen added.

CRE, which has a market value of $7.2 billion, said its profit fell to HK$356 million ($45.9 million) for the January-March quarter, down from HK$512 million profit a year earlier. That compared to a net loss of HK$30 million for the fourth quarter Of 2013.

Turnover for the quarter rose 15.7 percent to HK$41.8 billion from HK$36.15 billion the same quarter last year.

Last October, CRE announced a tie-up with the world's No.3 retailer, Tesco (Xetra: TCO.DE - news) , posing a challenge to hypermarket leader Sun Art Retail Group Ltd.

BEER GROWS

CRE, which owns China's top beer brand Snow, saw its beer division return to the black with profit at HK$6 million for the quarter, against a HK$23 million loss a year earlier as it enhanced its product mix. Revenue from its beer division rose 20.3 percent to HK$7.88 billion, with beer sales volume increasing 12 percent to 2.58 million kilolitres.

Snow brand had a market share of 23 percent in volume terms at the end of 2013. Profit from its beverage division rose 25 percent to HK$10 million.

In April, Tsingtao Brewery Co Ltd said its first-quarter net profit rose 20 percent on higher sales. China's second-biggest brewer by volume said it held around 17.2 percent share of the market last year.

CRE is controlled by China Resources (HKSE: 0291-OL.HK - news) (Holdings) Co Ltd , which in April appointed China Merchants Group's former chairman Fu Yuning as its new chief, replacing Song Lin who is being investigated by Chinese authorities.

CRE's shares, which were down 2.3 percent prior to the results statement, fell 4.2 percent in early afternoon trade, lagging a 0.1 percent fall in the benchmark Hang Seng Index .

($1 = 7.7535 Hong Kong dollars) (Editing by Matt Driskill)